Improved Economic Outlook Boosts Oil Prices

Oil prices improved on Tuesday on post-Covid-19 economic optimism and signals that oil was oversold after Monday’s turbulent session. In its global economic outlook report issued Tuesday, the International Monetary Fund (IMF) forecast that global GDP would grow by 6% in 2021, up from 5.5% in its previous assessment in January. The US will see an expansion of 6.4% due to massive stimulus programs, and China’s economy will grow 8.4%, the IMF said. Still, oil markets are walking a tightrope given sufficient supplies in the front-months and Opec-plus alliance members’ decision last week to begin easing their production quotas in May, which some analysts feel is a bit premature (OD Apr.1'21). In London, global benchmark ICE Brent for the front month of June rose 59¢ to $62.74 per barrel, while on Nymex in New York, US benchmark West Texas Intermediate (WTI) gained 68¢ to finish at $59.33/bbl. At one point in the session Brent reached $64.28/bbl, a considerable gain on Monday, but the rally quickly fizzled. Markets have been volatile since a brutal session on Mar. 18 in which oil prices tanked by 7%, and observers say they are likely to remain choppy as traders cope with oversupply fears and stubborn outbreaks of Covid-19 in many parts of the world. “Opec-plus cut their global demand growth [on Mar. 30] and then increased production on [Apr. 1]," and prices reacted accordingly, said Robert Yawger, director of energy futures at Mizuho Securities. “That is Economics 101, first chapter.” In the US, the Energy Information Administration had reported five weekly builds of crude oil beginning in late February until the trend was broken in the week ending Mar. 26 (OD Mar.31'21). This week’s report, to be published on Wednesday, could trigger another wild day of trading. Technical analysis shows that the market has been tossed on its head. Both crude and oil products have found support at the 22-day moving average since they began blazing upward in October, Brian LaRose of Icap explained. After Mar. 18, however, the 22-day moving average has switched to a resistance level. “We’re seeing this across the board” for Brent, WTI, and light products, said LaRose, adding that it was likely the oil market would move into either an extended phase of consolidation, or sideways movement, or a downward retracement. Gary Peach, Albany